Negotiation

Negotiation

Negotiation is a form of interaction through which individuals, organizations, and governments explicitly try to arrange (or pretend to do so) a new combination of some of their common and conflicting interests. Two types of common interests can be distinguished: (1) an identical common interest in a single arrangement or object which the parties can bring about only, or more easily, by joining together and (2) a complementary interest in an exchange of different objects which the parties cannot obtain by themselves but can only grant to each other.

To realize an identical common interest the parties must agree on the characteristics of the arrangement (concerning which they may have different preferences) and on the division of gains and costs (where their interests usually conflict).

Two nations jointly constructing a dam and two corporations merging into a single firm are examples of such arrangements. Complementary interests are realized through barters, sales, or agreements on mutual tariff concessions. Most international negotiations embrace a combination of identical common interests and complementary interests, whereas business negotiations are predominantly concerned with complementary interests.

The parties may relate their conflicts and common interests explicitly or tacitly. The term “negotiation” usually refers to the explicit process, with proposals and counterproposals. “Tacit bargaining”occurs if the parties deliberately arrange a new combination of common and conflicting interests through hints and guesswork, without explicitly proposing terms for agreement. Tacit bargaining is of great importance in military confrontations, when negotiation may be difficult because of incompatible war aims, domestic opinion, or the lack of diplomatic relations. Tacit bargaining can help to keep the area of hostilities limited, restrain the use of force, and prepare the ground for negotiations to terminate hostilities. These functions of tacit bargaining received little detailed attention until the 1950s, when they were analyzed in connection with studies of limited war, arms control, and military deterrence (Schelling 1960). Negotiation, by contrast, is necessary for more complicated forms of collaboration, for most exchanges, and for any arrangement where an explicit agreement is essential.

Negotiating for side effects . The process of negotiation can have side effects that do not concern the agreement which is ostensibly being negotiated. In international diplomacy these side effects are far more important than, say, in business or labormanagement negotiations. Indeed, they are sometimes the principal or only reason why governments participate in an international conference. That is, governments may negotiate not so much to obtain favorable terms of agreement as to spread propaganda, to gather intelligence, to influence third parties, to divert the opponent from the use of force, to deceive him, or to maintain contact with him in order to communicate on other matters. (Hence, the above definition of “negotiation” allows for the fact that parties may only pretend to seek an agreement.) In areas such as disarmament, where public opinion generally favors negotiation, governments may attend conferences just to appear virtuous (Spanier & Nogee 1962). One advantage of private or secret diplomacy when agreement is desired is that it reduces the importance of some distracting side effects.

Models of the negotiating process. Negotiation can be analyzed in terms of (a) the interaction of some basic choices that the parties must make and (b q) certain basic moves through which each party can influence the opponent’s choice. Game theory provides mathematical models to represent this simplified structure. Like other models in social science, they are, of course, of limited use in the study of negotiation, because they frequently do not represent enough of reality to be relevant and sometimes misrepresent even that part of reality which they address. What a model can easily represent is the interaction between each party’s choice of settling for the opponent’s terms or not concluding an agreement, provided each party maintains unchanging evaluations of its gains and losses from each outcome (i.e., provided the utilities of each outcome remain stable for each party).

Obviously, negotiation can result in agreement only if there exists at least one set of terms that each party would prefer to having no agreement. Frequently several sets of terms or a range of terms among which the parties have conflicting preferences meet this condition. The question arises, therefore, on which terms the parties will settle—who will get his way?

Commitments and threats. Commitments and threats are the two basic moves in negotiation. If you make a commitment, you try to alter the opponent’s expectations about your future conduct by changing your own incentives; if you issue a threat, you try to alter your opponent’s expectations about his payoffs that would result from his making certain choices. A commitment is a move to convince your opponent that you will maintain your current position, or implement your prediction, by making it more difficult for yourself not to do so. A threat is a prediction addressed to your opponent(or to those who might influence him) that he will suffer a certain loss if he does not comply with your wishes.

A commitment works as follows: Given a range of terms that both you and your opponent prefer to not having an agreement, you try to induce your opponent to accept those terms within this range which are most favorable to you by making it difficult, or virtually impossible, for yourself to accept any other terms. In other words, you narrow the range within which you would prefer agreement so that it will include only your most favored terms. If your opponent realizes this, he must then expect that you would reject an agreement unless he meets your favored terms. Of course, the opponent might commit himself, too, and the terms of agreement will then depend, among other things, on the relative strength of these commitments. If the commitments are strong, no agreement might result even though both parties, initially, would have been better off with agreement. The binding power of a commitment in interpersonal negotiations may stem, for example, from a wager, an oath, or an accord with a third party not to settle for less than one’s preferred terms. In international negotiations, governments can commit themselves by staking their prestige on a position or by the way in which they tie their military or economic resources to it.

The concept of a threat—more complicated than that of a commitment—has been analyzed more carefully in modern theories of military strategy than in studies on diplomacy. (Military deterrence is based on a threat.) The party that threatens asserts it will make a special effort to cause the opponent a certain loss should he fail to comply. But carrying out the threat (i.e., inflicting this loss) may be costly for the threatener as well, perhaps even more costly than for his opponent. Hence, the question arises of the credibility of the threat, that is, whether it will be carried out when challenged or whether it will turn out to be a bluff. To make a threat more credible, it may be reinforced with a commitment [seeDeterrence].

In negotiations where a party wishes to change the status quo in its favor, at the expense of a party defending it, the offensive party always needs a threat to make the defensive party fear that it would lose more by not reaching an agreement than by agreeing to accept the detrimental change. The classic example of such negotiation is the Munich conference of 1938.

In addition to this rudimentary structure of the negotiating process, a number of complications must be introduced into any theoretical scheme that is to explain or reflect reality. These additional features are usually omitted in the formalized models and are difficult to simulate in laboratory experiments. Laboratory experiments have been developed to test models which include the more basic features of the negotiating process, such as the combination of conflict and common interests, the choice between concluding an agreement and not concluding one, and the use of threats and commitments (Rapoport & Orwant 1962).

Domestic affairs of the parties. An additional complication is the fact that the parties often are not unitary decision makers. This is of crucial importance in international negotiation and is often relevant in labor-management negotiation. The negotiators have to bargain not only with the opponent but also with members of the organization that they represent. For example, the union representative in labor-management negotiations must be mindful not to lose the support of the rank-andfile union members. A corporation executive engaged in negotiations for a merger must align other corporate officers and perhaps important stockholders. And diplomats, of course, have their domestic opinion, legislatures, and sometimes, even competing branches of the executive to worry about.

Secret diplomacy can keep some of these domestic groups ignorant of the day-to-day negotiating process. This often turns out to be advantageous, not just for the chief negotiator but also for the organization or the government as a whole by helping it to defend a broader public interest that transcends parochial pressure groups. In the United States, the influence of domestic affairs on foreign policy is more apparent than in many other countries and has received considerable attention (Westerfield 1955). But domestic pressures can also help a negotiator to obtain better terms: they can serve as a commitment in that they may convince the opponent that he must yield because the first negotiator could not concede even if he wanted to. Indeed, a favorite argument among negotiators, both Western and communist ones, is that public opinion at home forces them to remain firm.

Future bargaining strength. A second complication in real-life negotiation is that the parties are usually trying not only to get good terms for the agreement under negotiation but also to protect and improve their future bargaining strength. This is particularly true in international negotiation. In the language of game theory: international negotiation is never a self-contained game but is a phase vaguely related to a never-ending “supergame.” Although each negotiation yields its own payoffs, the tactics used in it affect the opponent’s calculations in later negotiations and thereby influence subsequent payoffs. The reason for this continuity is that the opponent will impute to the government a certain diplomatic style, certain attitudes toward risk taking and the use of force, a degree of political will, a certain tendency to bluff or to hold fast to a position, and so forth. Of course, this reputation is not permanent, and it is often confined to a particular subject of negotiation. For example, a government may be known to haggle over a wide range in commercial negotiations but to modify its positions very little on political issues.

Rules and norms. The third complicating feature in negotiation (as contrasted with more rudimentary bargaining situations) is due to the fluidity of the rules that regulate the way in which the parties conduct negotiations. This fluidity is particularly pronounced in international diplomacy. In business and labor–management negotiations, many rules are quite clear and firm, because they are enforced by higher authority. For example, the use of force is prohibited or severely controlled, and an offer that has been accepted can usually no longer be withdrawn. According to the U.S. National Labor Relations Act of 1947, the parties must follow some rules even in the way in which they defend their positions (Cox 1958).

However, many rules in interpersonal negotiation, and practically all the rules in intergovernmental negotiation, are not enforceable. Here the concept “norms” may be more appropriate than “rules.” Each party follows varying sets of norms, depending on the situation and on the type of opponent. Friendly parties share a far more extensive set of norms than do enemies. Indeed, the violation of certain norms is likely to terminate, or at least interrupt, a friendly relationship. For example, unambiguous lies and invective must be avoided, explicit threats must not be issued, and agreements in principle must not be deliberately misconstrued later on.

Since there is no enforcement, what keeps the parties from violating these norms when it would be to their advantage to do so? First, it must be observed that the norms frequently are violated. Even the most elementary norm of diplomacy, the rule that the opponent’s negotiator should not be killed, has been violated not only in antiquity but also in modern times. The norms are usually observed for two principal reasons: (1) the parties want to induce the opponent to reciprocate and (2) they want to facilitate agreement. However, reciprocation is not always felt to be mandatory, nor do all the norms observed by diplomats facilitate agreement. In these cases, the norms are followed not because it is expedient but because they are felt to be in keeping with the proprieties.

Thus, the rules that are more or less observed in negotiation resemble the norms or mores studied by sociologists. They may be followed because (1) of expediency; (2) the negotiator does not want to shock others who feel the norms prescribe the proper behavior; or (3) the negotiator himself considers it unseemly or immoral to violate these norms. Examples of such norms are that an agreed agenda ought to be adhered to, that partial agreements should not be reversed, that concessions should be reciprocated, and that emotional outbursts and physical violence at the conference table are to be avoided.

Instability of evaluations . A final complication of cardinal importance in negotiation must be added. The way in which the parties evaluate their own payoffs and those of the opponent is highly uncertain and keeps changing as a result of negotiation. This is true even in negotiation about simple, quantifiable issues, such as a purchase price, and it applies with particular force in diplomacy. In most negotiations, as is not the case in parlor games, there are no firm bench marks that divide gains from losses. To evaluate whether certain options would be advantageous or not, each negotiator must have a break-even point in mind that divides the plus side from the minus side. These points are subjective ideas which keep shifting under the impact of negotiation. For instance, a party may initially feel that it breaks even as long as it preserves the status quo, whereas later on—after having faced an aggressive opponent for some time—the preservation of the status quo may seem like a gain worth concessions on another issue.

Not only these break-even points keep shifting; the scales by which the parties evaluate the magnitude of their gains and losses show the same fluidity. If a large effort is being exerted to obtain a small improvement, this improvement may seem like a large gain in the end. And the reverse reaction is well known in everyday human affairs, characterized by the “sour grapes” story.

Important consequences follow from this instability of evaluations. First, the parties cannot know, before being faced with a specific choice, what their minimum terms are at which they would still accept an agreement. The notion of fixed minimum positions for each party is realistic only for short time periods and very simple issues, which are rarely found in diplomatic negotiation. Second, since the break-even point for each party keeps shifting as the result of negotiation, the point which equally divides the gains and losses between the opponents keeps changing, too. Concepts such as “fair” division and “equitable solution” are therefore dependent variables of the negotiation process. In other words, a view that the payoffs between the parties are equal, or “fairly” distributed, is in itself an outcome of the negotiating process. It is not an objective criterion by which one can evaluate negotiations. This is also true for mediators or arbitrators: their image of what is a “fair” division depends on how the parties succeed in presenting the issues to them.

Related to changing evaluations is the fact that the parties change their goals while they are engaged in negotiation. For example, when the goals become more modest, a settlement may turn out to be satisfactory that would have initially been found to be unacceptable. This relationship between one’s goals and one’s evaluations of the outcome achieved has been studied by psychologists using the concept “level of aspiration” (Siegel & Fouraker 1960; Frank 1941).

Compromise and focal points. Compromise is often considered essential for negotiation. And a settlement is often called “fair” just because it has been reached through compromise. However, there are several other ways of reaching agreement, and whether or not a particular compromise accords with given standards of fairness must depend on the intrinsic merits of the positions. All that can be observed in a compromise is that the parties have revised their positions through concessions until they have met in agreement. Yet one side may have retreated from an extravagant position while the other one has made sacrifices from a modest position.

Certain salient features in the area under dispute often provide a focal point where the expectations of the parties meet, regardless of whether their positions converge through a compromise or through some other maneuver (such as one side catching up with rising demands by the other side).Round figures tend to be a likely point for settling monetary issues, and geographic latitudes or a river for territorial issues. Also, precedents from similar settlements frequently serve as such focal points. The influence of mediators is due largely to the fact that by selecting a possible point of agreement, they create a focal point.

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Negotiation

Encyclopedia of Small Business
COPYRIGHT 2007 Thomson Gale

Negotiation

Negotiation describes any communication process between individuals that is intended to reach a compromise or agreement to the satisfaction of both parties. Negotiation involves examining the facts of a situation, exposing both the common and opposing interests of the parties involved, and bargaining to resolve as many issues as possible. Negotiation takes place every day in nearly every facet of life—from national governments negotiating border disputes, to companies negotiating work agreements with labor unions, to real estate agents negotiating the sale of property, to former spouses negotiating the terms of a divorce. Small business owners are likely to face negotiations on a daily basis when dealing with customers, suppliers, employees, investors, creditors, government agencies, and even family members. Many companies train members of their sales forces in negotiation techniques, and many others hire professional negotiators to represent them in business dealings. Good negotiation requires advance preparation, a knowledge of negotiating techniques, and practice.

Regardless of the type of negotiation, experts recommend entering into it with a cooperative rather than a competitive attitude. They stress that the point of negotiating is to reach agreement rather than to achieve victory. "Any method of negotiation may be fairly judged by three criteria," Roger Fisher and William Ury wrote in their book Getting to Yes: Negotiating Agreement without Giving In. "It should produce a wise agreement if agreement is possible. It should be efficient. And it should improve or at least not damage the relationship between the parties." When one of the parties uses "hard" negotiating techniques—or bullies and intimidates the other side in order to obtain a more favorable arrangement—it only creates resentment and poisons future negotiations. Instead, the idea should be to find a win/win solution that satisfies the needs and interests of both parties.

PREPARING FOR A NEGOTIATION

Four basic things are recommended for any party about to engage in discussions to arrive at a negotiated agreement. First, advance preparation. Second, an understanding of the underlying assumptions and needs to be satisfied on both sides. Third, a basic knowledge of human behavior. Fourth, mastery of a range of negotiating techniques, strategies, and tactics. In his classic book on the subject, Fundamentals of Negotiating, Gerard I. Nierenberg outlined a number of steps toward adequately preparing for a negotiation. The first step is to "do your homework" about the other side. In nearly every negotiation, this will entail research to uncover their underlying motivations. In negotiating a business property lease, for example, it may be useful to find out the cost to the landlord of keeping the building vacant. The next step is to assess your own side's needs and establish objectives for the negotiation. It is important that the objectives remain relatively fluid, however, so as not to hinder progress with discussions and maintain maximum flexibility.

Another element of preparing for a negotiation involves deciding whether to use an individual or a team as your representative. This decision needs to be considered separately for every negotiation, and will always depend to some extent on what the other side is doing. A negotiating team offers a number of potential advantages. For example, it enables a small business to involve people with different areas of expertise in order to avoid misstatements of fact. Teams can also play into negotiating strategies and help gain concessions through consultation among team members. However, it is important to note that bringing extra people can be harmful to a negotiation when they do not have a distinct function. Using a single negotiator also offers some advantages. It prevents the weakening of positions that often occurs through differences of opinion within a team, and it also may help gain concessions through the negotiator's ability to make on-the-spot decisions.

The next step in preparing for a negotiation involves choosing a chief negotiator. Ideally, this person should have experience and training in negotiations, as well as a strong background in the area of the problem about which discussions are being held. Another important element of negotiation is selecting the meeting site. For a small business, holding the meeting on its own premises may provide a psychological advantage, plus will save on travel time and expense. It may also be helpful in enabling the negotiators to obtain approval from managers or use their own facilities to check facts and find additional information as needed. Holding a negotiation at the other side's offices, however, may help the negotiators to devote their full attention to the task at hand without distractions. It may also play into negotiating strategy by enabling the negotiators to temporarily withhold information by claiming a need to speak to higher level people or gather more information. A third alternative for a meeting site is a neutral location. Whatever site is chosen, it should be large enough to accommodate all parties and feature a telephone, comfortable chairs, visual aids, and available refreshments.

THE NEGOTIATION PROCESS

Fisher and Ury recommend conducting negotiations according to the process of "principled negotiation." Their method has four main tenets:

Separate the people from the problem. The idea should be for both sides to work together to attack a problem, rather than attacking each other. To achieve this goal, it is necessary to overcome emotional responses and set aside egos.

Focus on interests rather than positions. The natural tendency in many negotiations—for example, dickering over the price to be paid for an antique—is for both sides to state a position and then move toward middle ground. Fisher and Ury warn against confusing people's stated positions with their underlying interests, and claim that positions often tend to obscure what people truly hope to gain through negotiation.

Generate a variety of options before deciding what to do. The pressure involved in any type of negotiation tends to narrow people's vision and inhibit their creativity, making it difficult to find optimal solutions to problems. Instead, Fisher and Ury suggest developing a wide range of possible solutions as part of the negotiating process. These possible solutions should attempt to advance shared interests and reconcile differences.

Base the result on objective criteria. No one will be happy with the result of a negotiation if they feel that they have been taken advantage of. The solution is to find and apply some fair standard to the problem in order to guarantee a mutually beneficial result.

Fisher and Ury's principles provide a good overall guide for the actual negotiation process. In his book, Nierenberg offered a number of other tips and strategies that may be effective in promoting successful negotiations. For example, it may be helpful to ask questions in order to form a better understanding of the needs and interests of the other side. The questions must be phrased diplomatically and timed correctly in order to avoid an antagonistic response. The idea is to gain information and uncover basic assumptions without immediately taking positions. Nierenberg stressed the importance of listening carefully to the other side's responses, as well as studying their facial expressions and body language, in order to gain quality information.

Nierenberg noted that good negotiators tend to employ a variety of means to accomplish their objectives. Small business owners should be aware of some of the more common strategies and techniques that they may see others apply or may wish to apply themselves. One common strategy is forbearance, or "patience pays," which covers any sort of wait or delay in negotiations. If one side wishes to confer in private, or adjourn briefly, they are employing a strategy of forbearance. Another common strategy is to present a fait accompli, or come to a final offer and leave it up to the other side to decide whether to accept it. In a simple example, a small business owner may scratch out one provision in a contract that he or she finds unacceptable, then sign it and send it back. The other party to the contract then must decide whether to accept the revised agreement. Nierenberg warns that this strategy can be risky, and encourages those who employ it to carefully appraise the consequences first.

Another possible negotiating strategy is reversal, which involves taking a position that seems opposed to the original one. Similarly, feinting involves apparently moving in one direction in order to divert attention from the true goal. For example, a negotiator may give in on a point that is not very important in order to make the real objective more attainable. Another strategy involves setting limits on the negotiation, whether with regards to time, the people involved, or other factors. It is also possible to change the participation in the negotiation if it seems to be at an impasse. For example, a neutral third party may be enlisted to help, or one or two people from each side may be sent off to continue the negotiation separately. It may also be helpful to break down the problem into small pieces and tackle them one by one. Another strategy might be to trade sides for a short time and try to view the situation from each other's perspective. All of these techniques may be applied either to gain advantage or to push forward a negotiation that has apparently reached an impasse.

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Negotiation

NEGOTIATION

Negotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas. Oliver (1996) described negotiation as "negotiators jointly searching a multi-dimensional space and then agreeing to a single point in the space."

Negotiation applies knowledge from the fields of communications, sales, marketing, psychology, sociology, politics, and conflict resolution. Whenever an economic transaction takes place or a dispute is settled, negotiation occurs; for example, when consumers purchase automobiles or businesses negotiate salaries with employees.

NEGOTIATION STYLES

Two styles of negotiating, competitive and cooperative, are commonly recognized. No negotiation is purely one type or the other. Instead, negotiators typically move back and forth between the two styles based on the situation.

On one end of the negotiation continuum is the competitive style. Competitive negotiation—also called adversarial, noncooperative, distributive bargaining, positional, or hard bargaining—is used to divide limited resources; the assumption is that the pie to be divided is finite.

Competitive strategies assume a "win-lose" situation in which the negotiating parties have opposing interests. Hostile, coercive negotiation tactics are used to force an advantage, and prenegotiation binding agreements are not allowed. Concessions, distorted communication, confrontational tactics, and emotional ploys are used.

Skilled competitive negotiators give away less information while acquiring more information, ask more questions, create strategies to get information, act firm, offer less generous opening offers, are slower to give concessions, use confident body language, and conceal feelings. They are more interested in the bargaining position and bottom line of the other negotiating party, and they prepare for negotiations by developing strategy, planning answers to weak points, and preparing alternate strategies.

A buyer-seller home purchase transaction illustrates competitive negotiating. The buyer gathers information to determine home value, quality, expenses, and title status. The seller gathers information to ensure that the prospective buyer qualifies for the loan. The parties negotiate concessions regarding home repairs, items to remain in the house, closing dates, and price. The negotiations stall as the buyer and seller disagree on a closing date; the seller retaliates by keeping the buyer out of the home for several days after the closing date. As a consequence of the competitive strategies used, the relationship between the buyer and seller suffers; however, the end result (sale and purchase of a home) satisfies both parties.

On the other end of the negotiating style continuum is cooperative negotiating, also called integrative problem solving or soft bargaining. Cooperative-negotiation is based on a win-win mentality and is designed to increase joint gain; the pie to be divided is perceived as expanding. Attributes include reasonable and open communication; an assumption that common interests, benefits, and needs exist; trust building; thorough and accurate exchange of information; exploration of issues presented as problems and solutions; mediated discussion; emphasis on coalition formation; prenegotiation binding agreements; and a search for creative alternative solutions that bring benefits to all players. The risk in cooperative negotiating is vulnerability to a competitive opponent.

Cooperative negotiators require skills in patience; listening; and identification and isolation of cooperative issues, goals, problems, and priorities. Additionally, cooperative negotiators need skills in clarifying similarities and differences in goals and priorities and the ability to trade intelligently, propose many alternatives, and select the best alternative based on quality and mutual acceptability.

Cooperative negotiating might be used, for example, in a hiring situation. An employer contacts a candidate to encourage the candidate to submit his or her credentials for a job opening. Trust is built and common interests are explored as the employer and candidate exchange information about the company and the candidate's qualifications. Creative solutions are explored to accommodate the candidate's and employer's special circumstances, including work at home, flexible scheduling, salary, and benefits. The two parties successfully culminate the negotiations with a signed job contract.

THE NEGOTIATION PROCESS

Stages in the negotiation process are (1) orientation and fact finding, (2) resistance, (3) reformulation of strategies, (4) hard bargaining and decision making, (5) agreement, and (6) follow-up (Acuff, 1997). For example, a consumer purchasing an automobile investigates price and performance, then negotiates with an agent regarding price and delivery date. Resistance surfaces as pricing and delivery expectations are negotiated. Strategies are reformulated as the parties determine motivation and constraints. Key issues surface as hard bargaining begins. Problems surface, and solutions—such as creative financing or dealer trades—are created to counter pricing and delivery problems. After details are negotiated, the agreement is ratified. After the sale, the agent may follow up with the buyer to build a relationship and set the stage for future purchase and negotiation. The six stages of the process would be approached differently depending on where the negotiators reside on the style continuum.

Basic strategies, both cooperative and competitive, that can be applied in the negotiation process are:

Use simple language

Ask many questions

Observe and practice nonverbal behavior

Build solid relationships

Maintain personal integrity

Be patient

Conserve concessions

Be aware of the power of time, information, saying no, and walking away

Pay attention to who the real decision maker is, how negotiators are rewarded, and information sources

Listen actively

Educate the other party

Concentrate on the issues

Control the written contract

Be creative

Appeal to personal motivations and negotiating styles

Pay attention to power tactics

Be wary of such unethical tactics as raising phony issues; extorting; planting information; and making phony demands, unilateral assumptions, or deliberate mistakes

The following summarize strategies that might be used in various stages of negotiations.

Initial Stages

Plan thoroughly

Identify and prioritize issues

Establish a settlement range

Focus on long-term goals and consequences

Focus on mutual principles and concerns

Be aware that "no" can be the opening position and the first offer is often above expectations

Be aware of the reluctant buyer or seller ploy

Middle Stages

Revise strategies

Consider many options

Increase power by getting the other side to commit first

Add credibility by getting agreements in writing

Be wary of splitting the difference

To handle an impasse, offer to set it aside momentarily

To handle a stalemate, alter one of the negotiating points

To handle a deadlock, bring in a third party

When asked for a concession, ask for a trade-off

Be wary if the other party uses a "higher authority" as a rationale for not meeting negotiating points

Be aware of the "vise" tactic ("you'll have to do better than that")

Ending Stages

Counter the other party's asking for more concessions at the end by addressing all details and communicating the fairness of the deal in closure

Counter a persistent negotiator by withdrawing an offer

Do not expect the other party to follow through on verbal promises

Congratulate the other side

INTERNATIONAL NEGOTIATING

In international negotiations, obstacles arise when negotiating teams possess conflicting perspectives, tactics, and negotiating styles. Negotiators often assume that shared beliefs exist when, in reality, they do not. Examples are different uses of time; individualism versus collectivism; different degrees of role orderliness and conformity; and communication patterns, that differ widely worldwide. These cultural factors affect the pace of negotiations; negotiating strategies; degree of emphasis on personal relationships; emotional aspects; decision making; and contractual and administrative elements (Acuff, 1997). The goal of the negotiator should be to "look legitimately to the other side by their standards" (Fisher, 1997).

COLLECTIVE BARGAINING

Collective bargaining frequently requires a third party to help the parties reach an acceptable solution. In these situations, such strategies as mediation, arbitration, and conflict resolution are used.

SUMMARY

Negotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas. Two styles of negotiating, competitive and cooperative, are commonly recognized, with most negotiators moving back and forth between the two styles based on the situation. A number of strategies were discussed that negotiators might use in negotiation stages. The effectiveness of various strategies can vary based on cultural differences.

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Negotiation

Negotiation

Resolving a family dispute, concluding a business deal, settling a lawsuit, or agreeing to end hostilities all involve negotiation. Negotiation is a common technique for resolving disagreements and conflicts that arise between individuals, businesses, or nation-states. It is particularly important in the political arena, where violence has been and continues to be used as a way to reconcile competing values and interests. Negotiation is a nonviolent method of regulating political competition and resolving conflicts that competition inevitably creates. It is a prominent feature of democratic political systems and the democratic norm of bounded competition. Likewise, negotiation in international politics is a technique of regulated argument between nation-states seeking to arrive at a mutually acceptable outcome on an issue or issues of common concern. It is an important function of diplomacy and central to the functioning of the international system.

Negotiation is a process of communication between two or more parties whose interests in an issue or issues overlap or conflict. As a process, it provides a channel for identifying common or conflicting interests and reaching agreement on collective action or compromise. The negotiation process can be either competitive (there are winners and losers as a result of negotiations) or collaborative (the outcome of a negotiation is one of mutual gain or “win-win”). Negotiations that are primarily competitive in approach are often conceptualized as a game or strategic contest like chess or checkers. The fundamental objective of the participants in this kind of negotiation is to prevail over their opponent within mutually accepted rules and procedures. Positional bargaining is the tactic commonly associated with this approach. Negotiations that are collaborative in approach emphasize common interests as the basis for a dialogue. The goal of the participants in this kind of negotiation is to achieve a result that is minimally acceptable to all involved. The tactic identified with this approach is called interest-based bargaining. While the competitive approach to negotiations is the most prevalent, the collaborative approach is considered to produce better and more lasting outcomes. Whether a negotiation is competitive or collaborative depends on a number of contextual and situational factors, such as the negotiation environment or setting, the issues and actors involved, and the strategies or bargaining tactics employed.

It is common to think of the negotiation process in terms of stages or phases. There are a variety of ways of dividing the negotiation process into its component parts. One popular framework divides the process into three stages—the prenegotiation stage, the formula stage, and the detail stage. Another divides the process into five phases—preparation, beginning, middle, end, and implementation. In any case, negotiations are predicated on recognition that an issue under contention is negotiable. For negotiations to take place, the parties in conflict must agree on the possibility that a negotiated settlement may prove advantageous to all concerned. This aspect of the preparatory or prenegotiation stage is perhaps the most difficult, particularly in conflicts where the stakes are high. Once the need and willingness to negotiate is established, two other matters are then taken up—the agenda and the procedures. Setting an agenda and establishing the procedures for talks can also be very difficult and contentious though less so in matters of low importance or if the stakes are low. After the agenda (what issues are to be discussed and in what order) and the procedures (the format, venue, the level and composition of delegations, and timing) have been settled, the formal negotiations commence. In this stage of the process, the parties through designated negotiators engage in the give-and-take of the negotiation process. In many cases, negotiators will initially try to agree on the broad principles of a settlement (the formula stage) followed by negotiations on the details of the agreement (the details stage). Ostensibly the negotiation process ends when an agreement (e.g., a contract, treaty, protocol) is signed, though it is argued that the process often extends to a postnegotiation or implementation stage.

Although the negotiation process in the international arena displays many of the same characteristics and operates according to many of the same rules developed 300 years ago, it has become much more complex as the international system has evolved. Today, international negotiations, which are predominantly multilateral and conducted within established international institutions, such as the United Nations, the World Trade Organization, and the International Monetary Fund, address a host of contentious global issues (e.g., climate change, human rights, HIV/AIDS) beyond the traditional military-security concerns (e.g., arms control, Arab-Israeli conflict) and involve a vast number of nonstate actors (e.g., nongovernmental organizations, networks of experts or specialists—so-called epistemic communities, multinational or transnational corporations) active in the international arena. These and other situational factors have altered the dynamics of international negotiations, making an already complicated, arduous, and time-consuming process even more so. At the same time, new and innovative negotiation forums have developed—so-called track two negotiations in which individuals or nongovernmental organizations rather than government officials are the negotiators—that supplement or complement traditional “official” international negotiations.

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Negotiations consist of written and oral communications undertaken for the purpose of reaching agreement. When undertaken in good faith, negotiations include a process of give-and-take, whereby each party to the negotiations presents its position, critiques opposing positions, explores points of common ground, highlights divisive issues, proposes compromises and resolutions, and determines whether a mutually acceptable arrangement can be agreed upon to resolve the matters in dispute. When undertaken in bad faith, negotiations often are reduced to rancorous posturing aimed at assigning blame rather than reaching an amicable settlement.

Lawyers are constantly negotiating in civil litigation. Yet negotiation is not always used often enough, or extensively enough, to avoid litigation. Legal observers have suggested that a factor contributing to the high cost of litigation is the fear that the first side to propose settlement weakens its negotiating position. Since appearing eager to settle is taken as demonstrating a lack of confidence in one's case, both sides concentrate on discovery and preparing for trial so as to strengthen their hands for future negotiation while legal fees continue to mount.

The same fear does not ordinarily impede alternative dispute resolution proceedings, where a negotiated settlement is typically the goal for both parties. Alternative dispute resolution refers to an array of practices, procedures, and techniques that are used to resolve legal disputes by means other than formal civil litigation. Known more commonly as ADR, alternative dispute resolution is usually less costly and more time-efficient than civil litigation. ADR can also be more confidential than civil litigation. Court proceedings, records, and transcripts are generally open to public scrutiny and inspection in most civil litigation and cannot be sealed from the public absent an extraordinary justification. By contrast, parties to ADR proceedings can agree to insulate their dispute and its resolution from the public.

Early Puritan, Quaker, and Dutch settlers were among the first in North America to employ alternative means in resolving legal disputes. These tightly knit communities of settlers preferred even-tempered negotiations to adversarial litigation and treated litigation as a last resort to try only when procedures such as mediation and arbitration (discussed in detail below) failed to produce an acceptable and effective settlement. However, the term "alternative dispute resolution" was not coined in the United States until sometime during the 1970s, when it drew diverse support from influential members of society, including Chief Justice Warren Berger and consumer rights advocate Ralph Nader. Both Berger and Nader emphasized the perspective of the average citizen, who they said has neither the time nor the money to spend getting bogged down in drawn out court battles. Instead, Berger and Nader argued that average citizens find out-of-court negotiation alternatives to be a more palatable course, at least when done evenhandedly.

Congress helped fuel the ADR movement in the 1980s and 1990s by passing a series of legislative acts. In 1980 it passed the Dispute Resolution Act, which provides financial incentives for state governments and private entities to explore innovative approaches to negotiation and dispute resolution. 28 U.S.C. app. section 1 et seq; Pub. L. No. 96-190, 94 Stat. 17 (1980). In 1990 Congress passed the Administrative Dispute Resolution Act, which encourages federal agencies to use mediation and arbitration for prompt and informal resolution of disputes. 5 U.S.C.A. sections 571 et seq; Pub.L. 101-552, Nov. 15, 1990, 104 Stat. 2738, and renumbered and amended Pub.L. 102-354, Aug. 26, 1992, 106 Stat. 944, 946. Eight years later Congress passed the Alternative Dispute Resolution Act of 1998, which requires all federal district courts to establish an ADR program, making at least one form of ADR available to all federal civil litigants. 28 U.S.C.A. sections 651 et seq; Pub.L. 100-702, Title IX, Nov. 19, 1988, 102 Stat. 4659. By 2001 approximately ninety to ninety-five percent of all legal disputes were being resolved outside of trial by using negotiation through some form of ADR.

A wide variety of processes, practices, and techniques fall within the definition of "alternative dispute resolution." Arbitration and mediation are the best known and most frequently used types of ADR, but not the only ones. Minitrials, early neutral evaluations, and summary jury trials are less well-known forms of ADR. Many of these ADR techniques have little in common except that negotiation plays a prominent role in each. Parties to ADR procedures generally agree that a negotiated settlement is worth pursuing before investing time and money in full blown civil litigation.

Arbitration is the process of referring a dispute to an impartial intermediary chosen by the parties who agree in advance to abide by the arbitrator's award that is issued after a hearing at which all parties have the opportunity to be heard. Arbitration resembles traditional civil litigation in that a neutral intermediary hears the disputants' arguments and imposes a final and binding decision that is enforceable by the courts. One difference is that in arbitration the disputants elect to settle any future disputes by arbitration before a dispute actually arises, whereas with civil litigation the judicial system is generally chosen by a disgruntled party after a dispute has materialized. Another difference is that the disputants to an arbitration select the intermediary who will serve as arbitrator, whereas parties to civil litigation have little to no control over who will preside as the judge in judicial proceedings.

Arbitration also resembles litigation in that many parties use arbitration as a springboard to negotiation. Parties who know that their dispute will wind up in arbitration often fail to commence serious negotiations until shortly before or shortly after the arbitration proceedings have begun. Frequently, negotiations will continue simultaneously with the arbitration proceedings, meaning the parties' representatives will discuss settlement outside the hearing room while the hearing itself is underway inside. Arbitration can even expedite negotiations, since the parties know that once the arbitrator has issued a decision, the decision is typically final and rarely appeal-able.

There are two different forms of arbitration: private and judicial arbitration. Private arbitration is the most common form of ADR. Sometimes referred to as contractual arbitration, private arbitration is the product of an agreement to arbitrate drafted by the parties who enter a relationship anticipating that disputes will arise, but who mutually desire to keep any such disputes out of the courts. Private arbitration agreements typically identify the person who will serve as arbitrator. The arbitrator need not be a judge or government official. Instead, the arbitrator can be a private person whom the parties feel will have sufficient knowledge, experience, and equanimity to resolve a dispute in a reasonable manner. In some states, legislation prescribes the qualifications one must satisfy to be eligible for appointment as an arbitrator.

A private arbitrator's power is derived completely from the arbitration agreement, which may also limit the issues the arbitrator has authority to resolve. Private arbitration agreements are supported in many states by statutes that provide for judicial enforcement of agreements to arbitrate and arbitrator-rendered awards. However, statutes governing private arbitration often set forth criteria that must be followed before an arbitration agreement will be binding on both parties and enforced by a court. If those criteria are satisfied, a court will normally deem the arbitrator's decision final and enforceable. The losing party may only appeal the decision upon a showing of fraud, misrepresentation, arbitrariness, or capriciousness by the arbitrator.

Private arbitration is the primary method of settling labor disputes between unions and employers. For example, unions and employers almost always include an arbitration clause in their formal negotiations, known as collective bargaining agreements. By doing so, they agree to arbitrate future employee grievances over wages, hours, working conditions, and job security. Many real estate and insurance contracts also make arbitration the exclusive method of negotiating and resolving certain disputes that can arise between the parties entering those types of relationships.

Judicial arbitration, sometimes called court-annexed arbitration, is a non-binding form of arbitration, which means that any party dissatisfied with the arbitrator's decision may choose to go to trial rather than accept the decision. However, most jurisdictions prescribe a specific time period within which the parties to a judicial arbitration may elect to reject the arbitrator's decision and go to trial. If this time period expires before either party has rejected the arbitrator's decision, the decision becomes final, binding, and just as enforceable as a private arbitrator's decision.

Judicial arbitration is usually mandated by statute, court rule, or regulation. Many of these statutes were enacted to govern disputes for amounts that exceed the jurisdiction of small claims court but fall short of the amount required for trial in civil court. For example, in New York State claims for over $3,000 and for less than $10,000 must be submitted to non-binding judicial arbitration. NY CPLR Rule section 3405. Ten federal district courts also have mandatory programs for non-binding judicial arbitration that are funded by Congress. For example, rule 30 of the Local Rules of Court for the U.S. District Court for the Western District of Missouri provides that cases designated for compulsory, non-binding arbitration are those in which the damage award could not reasonably be expected to exceed $100,000.

Because judicial arbitration is mandatory but non-binding, it often serves as a means of facilitating negotiation between the parties to a dispute. Civil court calendars are frequently backlogged with hundreds of lawsuits. States hope that by mandating nonbinding arbitration for certain disputes the parties will see the value of a negotiated settlement where both parties compromise their positions, since their positions would likely be compromised were their dispute to be resolved in civil court. Seldom do litigants receive everything they ask for in their petitions, complaints, and answers.

Private and judicial arbitration are generally less costly and more time efficient than formal civil litigation. It has been estimated that the average arbitration takes 4 to 5 months while litigation may take several years. The cost of arbitration is minimal compared to civil trials as well, since the American Arbitration Association (AAA) charges only a nominal filing fee and the arbitrator may even work without a fee to broaden his or her professional experience.

Mediation is a rapidly growing ADR technique. It consists of assisted negotiations in which the disputants agree to enlist the help of a neutral intermediary, whose job it is to facilitate a voluntary, mutually acceptable settlement. A mediator's primary function is to identify issues, explore possible bases for agreement, discuss the consequences of reaching impasse, and encourage each party to accommodate the interests of other parties through negotiation. However, unlike arbitrators, mediators lack the power to impose a decision on the parties if they fail to reach an agreement on their own.

Mediation is sometimes referred to as conciliation, or conciliated negotiation. However, the terms are not necessarily interchangeable. Conciliation focuses more on the early stages of negotiation, such as opening the channels of communication, bringing the disputants together, and identifying points of mutual agreement. Mediation focuses more on the later stages of negotiation, exploring weaknesses in each party's position, investigating areas where the parties disagree but might be inclined to compromise, and suggesting possible mutually agreeable outcomes. Conciliation and mediation typically work well when the disputants are involved in a long-term relationship, such as husband and wife, wholesaler and retailer, and manufacturer and distributor, to name a few. Mediation and conciliation also work well for "polycentric" problems that are not easily solved by all-or-nothing solutions, as with certain antitrust suits involving a myriad of complex issues.

Although some jurisdictions have enacted statutes that govern mediation, most mediation proceedings are voluntary for both parties. Accordingly, a mediator's influence is limited by the autonomy of the parties and their willingness to negotiate in good faith. Thus, a mediator can go no further than the parties themselves are willing to go. Since agreements reached by mediation bear the parties' own imprint, however, many observers feel that they are more likely to be adhered to than decisions imposed by an arbitrator or court. Disputants who participate in mediation without representation of legal counsel are also more likely to adhere to settlements when the alternative is to pursue civil litigation, where attorneys fees consume a significant portion of any monetary award granted to the parties.

A minitrial is a process by which the attorneys for the parties present a brief version of the case to a panel, often comprised of the clients themselves and a neutral intermediary who chairs the process. Expert witnesses (and less frequently, lay witnesses) may be used in presenting the case. After the presentation, the clients, normally top management representatives who by now are more aware of the strengths and weaknesses of their positions, attempt to negotiate a settlement of the dispute. If a negotiated settlement is not reached, the parties may allow the intermediary to mediate the dispute or render a non-binding advisory opinion regarding the likely outcome of the case were it to be tried in civil court.

Minitrials are increasingly used by businesses to resolve large-scale disputes involving product liability questions, antitrust issues, billion dollar construction contracts, and mass tort or disaster litigation. The federal government also makes use of minitrials for disputes involving telecommunications. The Code of Federal regulations establishes procedures whereby individuals and entities under investigation by the FCC can request a minitrial prior to commencement of more formal administrative proceedings. 47 CFR section 1.730.

Minitrials are often effective because they usually result in bringing top management officials together to negotiate the legal issues underlying a dispute. Early in the negotiation process, upper management is sometimes pre-occupied by the business side of a dispute. Minitrials tend to shift management's focus to the outstanding legal issues. Minitrials also allow businesses to share information with each other and with their attorneys, providing a forum for initial face-to-face negotiations. Management also generally prefers the time-saving, abbreviated nature of minitrials over the more time-consuming and costly civil-litigation alternative. Minitrials expedite negotiations as well, by making them more realistic. Once the parties have seen their case play out in court, even in truncated fashion, the parties are less likely to posture over less relevant or meaningless issues.

Summary jury trials are an ADR technique used primarily in federal courts, where they provide parties with the opportunity to "try" their cases before an advisory panel of jurors, without having to face the final and possibly adverse decision of a regular jury in civil court. The purpose of the summary jury trial is to facilitate pretrial termination of cases in which a significant impediment to negotiation is disagreement between the attorneys or parties regarding a civil jury's likely findings on liability or damages in the case. Like minitrials, summary jury trials give the parties a chance to reach a preliminary assessment of the strengths and weaknesses of their positions and proceed with negotiations from a common starting point, namely the advisory jury's findings. Both summary jury trials and minitrials can ordinarily be scheduled and completed before formal civil cases would normally reach a court's docket.

Summary jury trials are presided over by a judge or magistrate in federal district court. A ten-member jury venire is presented to counsel for consideration. Counsel are provided with a short character profile of each juror and then given two challenges to arrive at a final six-member jury for the proceeding. Each attorney is given one hour to describe his or her client's case to the jury. After counsel's presentations, the presiding judge or magistrate delivers to the jury a brief statement of the applicable law, and the jury retires to deliberate. Juries are encouraged to return a consensus verdict, but they may return a special report that anonymously lists the view of each juror as to liability and damages. After the verdict or special report has been returned, counsel meet with the presiding judge or magistrate to discuss the verdict and to establish a timetable for settlement negotiations. Evidentiary and procedural rules are few and flexible.

Early neutral evaluation is an informal process by which a neutral intermediary is appointed to hear the facts and arguments of counsel and the parties. After the hearing, the intermediary provides an evaluation of the strengths and weaknesses of the parties' positions and the parties' potential exposure to liability for money damages. The parties, counsel, and intermediary then engage in discussions designed to assist the parties in identifying the agreed upon facts, isolating the issues in dispute, locating areas in which further investigation would be useful, and devising a plan to streamline the investigative process. Settlement negotiations and mediation may follow, but only if the parties desire. In some jurisdictions, early neutral evaluation is a court-ordered ADR technique. However, even in these jurisdictions the parties are given the option of hiring their own neutral intermediary or having the court appoint one.

The objective of early neutral evaluation is to obtain an early assessment of the parties' dispute by a credible outsider who has no interest in the outcome of the dispute but who has sufficient knowledge and experience to sift through the facts and issues and find the ground shared by the parties and the ground separating them. Much like in the other forms of ADR, the success of early neutral evaluation depends largely on the disputants' faith in the neutral intermediary. It also depends in large part on the disputants' willingness to compromise and settle the dispute. Successful early neutral evaluations can lead directly to meaningful negotiations.

The procedures and techniques discussed above are the most commonly employed methods of ADR. Negotiation plays an important role in each method, either primarily or secondarily. However, there are countless other ADR methods, many of which modify or combine the above methods. For example, it is not uncommon for disputants to begin negotiations with early neutral evaluation and then move to nonbinding mediation. If mediation fails, the parties may proceed with binding arbitration. The goal with each type of ADR is for the parties to find the most effective way of resolving their dispute without resorting to litigation. The process has been criticized as a waste of time by some legal observers who believe that the same time could be spent pursuing the claims in civil court, where negotiation also plays a prominent role and litigants are protected by a panoply of formal rights, procedures, and rules. But many participants in unsuccessful ADR proceedings believe it is useful to determine that their disputes are not amenable to a negotiated settlement before commencing a lawsuit.

Despite its success over the past three decades, ADR is not the appropriate choice for all disputants or all legal disputes. Many individuals and entities still resist ADR because it lacks the substantive, procedural, and evidentiary protections available in formal civil litigation. For example, parties to ADR typically waive their rights to object to evidence that might be deemed inadmissible under the rules of court. Hearsay evidence is a common example of evidence that is considered by the parties and intermediaries in ADR forums but that is generally excluded from civil trials. If a disputant believes that he or she would be sacrificing too many rights and protections by waiving the formalities of civil litigation, ADR will not be the appropriate method of dispute resolution.

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